At the time, Google's Business Product Manager for Trust and Safety
Shuman Ghosemajumder tried to calm advertisers' fears explaining that
Google was currently "...examining ways to make its fraud-fighting
efforts more transparent without revealing crucial information that
might help swindlers elude detection." Ghosemajumder did, however,
express concerns over revealing too much information, fearful it would
give away algorithm secrets to competitors.

Paid Search Revenues Continue to Rise

While the major search providers have always insisted the click fraud
rate is a gross overestimation, a 2005 Outsell survey found that click
fraud was a $1.3 billion problem for publishers. At the time, many
advertiser respondents (27 percent) said they planned to cut back and/or
eliminate paid search campaigns in 2006.

Outsell respondents may have intended to cut down on paid search, but
they certainly didn't follow through. SEMPO's year-end search marketing
report showed that North American advertisers spent $8 billion on paid
placement programs in 2006, amounting to 86 percent of 2006's total
search spend ($9.4 billion). Seventy-one percent of SEMPO respondents
said they used paid search campaigns, illustrating that there were not
many defectors.

Despite advertiser's insistent claims that the search engines don't
do enough to eliminate click fraud, paid search revenues continue to
fill the coffers of Google, Yahoo, Microsoft and many second and third
tier search engines Additionally, there is a huge gap in the professed
prevalence of click fraud between the search providers and the
advertisers and click fraud advocates.

Late last month, Google issues a statement on the Inside AdWords blog
that insisted invalid clicks consistently remain under 10, typically in
the single-digits, and that virtually all malicious activity is found
by Google's filter. Ghosemajumder claimed the percentage of clicks found
by advertiser-initiated investigations account for just .02 percent of
clicks. All other accounts, he said, are grossly overestimated.

Alchemist Media President Jessie Stricchiola takes issue with
Google's assertion that it refunds advertisers promptly for fraudulent
clicks, stating that "Google has been the most stubborn and the least
willing to cooperate with advertisers".

Google Click Fraud Filters

In February, Google outlined the three-layer filtration process it
uses to combat and eliminate click fraud. They described the system
which uses both proactive and reactive filters as follows:

Proactive Filters: Automated algorithms analyze
and filter out invalid clicks in real-time without billing advertisers
for these false clicks. This accounts for the vast majority of invalid
click detection.

Proactive Offline Analysis: Post billing, Google
uses automated and manual analysis to identify fraudulent clicks that
somehow made it through the first layer of filtration. Special attention
is paid to clicks occurring on the AdSense network. This is done
pro-actively and without any involvement from advertisers. When false
clicks are found, advertisers' accounts are immediately credited via
Click Quality Adjustments.

Reactive Investigations: Investigations take place
when an advertiser approaches Google concerned about suspicious activity
on their account. Each complaint is investigated, though Google says
refunds are relatively rare.
Google claims that the vast majority of fraudulent clicks, more than 99
percent, are found and thrown out within the first two stages of
filtration. The third stage only includes the .02 percent of clicks
where advertisers are affected by undetected cases of click fraud.

Click Fraud Detection Agency Estimates

In April 2006, The Click Fraud Index reported an industry-wide
average click fraud rate of 13.7 percent. The click fraud rate was
broken down as follows:

Tier 1 search providers -- 12.1 percent

Tier 2 search providers -- 21.3 percent

Tier 3 search providers -- 29.8 percent

Some of the newer click fraud prevention firms like Click Assurance
and ClickLab offer algorithm-based programs to limit bad clicks. These
programs estimate the statistical likelihood of a click being fraudulent
based on behavioral variables and IP address.

Gap in Prevalence of Click Fraud

As noted above, Google admits to a < 10 percent click fraud rate,
while advertisers and click fraud detection agencies believe it is more
like 14 to 20 percent. Ghosemajumder explained this gap saying that many
advertisers and click fraud detection agencies are looking at the wrong
signals, mistakenly classifying valid clicks as fraudulent.
Additionally, he believes many advertisers request refunds for clicks
already thrown out during the first two layers of the filtration system.

For example, misclassification might occur when counting reloads of
an advertiser's landing page. Say the customer clicks through to the
landing page, views a product page, and then hits the back button,
returning to the same landing page. Without proper tagging, that one
click and five page re-loads could be misclassified as 6 clicks from the
same visitor.
Google argues that there are hundreds of different signals that must be
monitored to detect click fraud, signals that are a closely guarded
company secret and known only to the Google click quality team.

A Solution for Click Fraud

Like other experts, we believe the only solution to click fraud is to
for independent auditors to evaluate the system using accurate data
provided by the search engines and advertisers themselves. It is the
only way to get a neutral calculation -- the current click fraud
detection agencies may not be entirely neutral, and certainly the search
providers are not neutral. We need an independent agency that has no
incentive to increase or decrease the click fraud rate. One solution
could be to use a technology firm like Fair Isaac, which is currently
conducting click fraud research for SEMPO.

One thing is certain, until advertisers are willing to provide
campaign info, and the search engines are willing to share click fraud
data, we'll never know the actual prevalence of click fraud or how much
advertisers are losing as a result.

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